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Bet on Santa to Defeat the Recession

A pair of experts on consumer psychology from Harvard Business School believe shoppers will spend more this holiday season than a year ago, giving retailers a chance to reassess the consumer mindset.

Professors Nancy Koehn and Rajiv Lal offer somewhat different predictions, although they agree that consumer spending is not going to return to pre-recession levels anytime soon, if ever.

Koehn forsees sales that will be "flat or marginally better" than last year's 3.7% drop in spending. She writes:

"After the shock and awe of last year's financial crisis, households are taking stock, abandoning the 'next new thing' in favor of more enduring priorities, and establishing distinct notions of value from those that have prevailed during the last decade. All of this adds up to the New Normal."
Lal believes consumers will spend more than expected.
"I am still betting on the power of Santa Claus. While consumer spending may never reach pre-recession levels, I think it will be much better than expected for a number of reasons."
One reason: consumers have exited that free-fall psychology of last year. We've also been saving more over the last year, providing a little war chest for spending.

Both agree that shoppers will be hunting for the basics, not extravagances (unless you are a Wall Street Bonus Baby), and that we will snap up promotions offered by Wal-Mart, Target, Best Buy and other discounters.

Read their more detailed comments.

Time for your forecast. Give us your prediction in our holiday shopping poll.
(Believe image by chris runoff, CC 2.0)

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